Annual Report 2006 - JAL | JAPAN AIRLINES

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JAL will be reborn with a strong balance sheet through continued cost structure reform including a thorough review ofprocurement costs and reduction in personnel costs.QWould you touch on the strategic high points for FY2006?First, in international passenger operations, the key is how to deal with skyrocketing fuel prices.We use four to five times as much fuel for international flights as for domestic flights. Fluctuationsin fuel prices have a large impact on profitability. We are changing over to fuel-efficient aircraftsuch as the Boeing 777s for flights to Europe, and diverting some jumbo jets to routes to short-haulneighbouring countries. This kind of fleet allocation leads to improving profitability. As we did inFY2005, we are actively restructuring under performing routes in accordance with the plan.In domestic passenger operations, the most important things are to make steady efforts to eliminatesafety problems and regain profitability and competitiveness.In our cargo business, we will aggressively go after demand and we expect solid growth in Asia,especially China.QWhat are the main points in revamping your cost structure, which you have beentackling since the previous fiscal year?We will work to reduce costs much further. First, we will review outside procurement, and substantiallylower contracted unit prices. We will examine every negotiation to determine how the pricingstacks up against the average. We will investigate every item to see if we can change to less costlyspecifications. Our goal is to change 3,000 items. I believe this will yield lower procurement costsof about ¥10 billion. As I said, we are continuing to restructure under performing routes. On top ofthis, we are making the utmost effort to reduce personnel costs. We have for the first time cut downon base salaries by 10%, and we aim to reduce our workforce through natural attrition.Higher quality and better network maintenance are our most important goals: we will proactively pursue both.QAs the new CEO, what are your aspirations?I want to promote thorough pursuit of quality and network maintenance as interdependent goals.Three things determine airline quality — safety, punctuality and service. For an airline, wider networksmean greater appeal. For example, a wider network helps customers accumulate mileagebenefits.We will establish and implement specific measures in pursuit of our twin goals of raising servicequality and improving network maintenance for customer convenience.10
QAs the new CEO, what are your commitments and thoughts on regaining trust?I am sure that our maintenance staff and other front-line staff have reviewed the basics of our business,and are fully dedicated to their work. We can continue to fly safely if we always go back tothe basics and work with a sense of high awareness. Our management staff, including myself, willgo to the front lines as often as possible to have better communication with our personnel.In Osaka, our employees carried out “OOKINI (Thank you)” campaign on a voluntary basis toexpress their gratitude to customers for their continued loyalty to JAL. They even made the campaign’sbanner on their own. One young employee said that because people from different departmentsgot together and cooperated to achieve the same goal, communication improved, and thework became easier.Our front-line employees are acting with a sense of urgency and are enthusiastic in their pursuitof safe flights. Transparency in management and workplace has improved as well, and much moreinformation about problems is now shared. We want management to continue nurturing this enthusiasmof the front-line.We will, above all, emphasize responding to the needs of society, gaining better public understanding, and fulfi lling ourcorporate social responsibilities.QFinally, please share with us your long-term vision and goals.Demand for flights in neighbouring East Asian countries is extremely strong, and our business environmenthas improved. Under the circumstances, JAL has a strong intention to respond to societalrequirements by providing services of the highest quality and maintaining the most convenientnetwork that customers can use without any worries at all.JAL used to consciously work to be No. 1 in terms of scale. Although it is important to pursue ahigh ranking and profits, it is wrong to make those one’s only objectives. We can only win the supportand understanding of the people around us by swiftly responding to social needs and fulfillingour social responsibilities. I believe that this is the most important factor in our regaining trust. Wewill spare no effort in doing this, and if this also results in higher profits and a high industry ranking,so much the better.11
Page 1 and 2: The JAL Group is a global player br
Page 3 and 4: CONSOLIDATED FINANCIAL HIGHLIGHTSJa
Page 5 and 6: Members of the Board of DirectorsTe
Page 7 and 8: Profi le of Mr. Haruka Nishimatsu,P
Page 9 and 10: QWill efforts in the Chinese market
Page 11: We will focus on narrowing the gap
Page 15 and 16: (2) We are pursuing various means o
Page 17 and 18: FUTURE DEVELOPMENT AND STRATEGY:MED
Page 19 and 20: FUTURE DEVELOPMENT AND STRATEGY:MED
Page 21 and 22: Related OperationsMany Group compan
Page 23 and 24: BOARD OF DIRECTORSJapan Airlines Co
Page 25 and 26: Consolidated net income(Billions of
Page 27 and 28: Consolidated stockholders’equity
Page 29 and 30: Liabilities and stockholders’ equ
Page 31 and 32: CONSOLIDATED STATEMENTS OF STOCKHOL
Page 33 and 34: Thousands ofU.S. dollarsMillions of
Page 35 and 36: Spare parts contained in flight equ
Page 37 and 38: Long-term debt at March 31, 2006 an
Page 39 and 40: The components of net periodic pens
Page 41 and 42: Thousands ofMillions of yen U.S. do
Page 43 and 44: Thousands of U.S. dollarsYear ended
Page 45 and 46: swaps to minimize the impact of for
Page 47 and 48: CONSOLIDATED SUBSIDIARIESJapan Airl
Page 49 and 50: JALPAK SERVICE INC. July 1, 1987 ¥
Page 51 and 52: TOURISM ESSENTIALS INC.WINDS PUBLIC
Page 53 and 54: KalamazooSyracuseGrand RapidsHarris
Page 55 and 56: INVESTOR INFORMATIONCompany Name:Ja

Annual Report 2006 - JAL | JAPAN AIRLINES

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